New technologies and new markets are transforming the electricity business. While the energy market is increasingly relying on distributed energy resources (DER), the technologies and frameworks necessary to manage DERs remain unclear. One such framework is the VPP.

Definitions for what constitutes a VPP vary; however, Navigant defines the VPP as “a system that relies upon software and a smart grid to remotely and automatically dispatch and optimize DER via an aggregation and optimization platform linking retail to wholesale markets.”

The VPP is the ultimate example of the energy cloud—the ability of anyone, anywhere to sell energy services to an open market. Without any fundamental infrastructure upgrades, VPPs can stretch supplies from existing generators and utility demand reduction programs. It represents an Internet of energy, tapping existing grid networks to tailor electricity supply and demand services for a customer, utility, or grid operator.

Indeed, VPPs benefit all three of these energy stakeholders. They can lower costs and create new revenue streams for consumers, help host distribution utilities avoid capital investments in grid infrastructure or peaking power plants, and provide transmission grid operators with regulation ancillary services such as spinning reserves.

The end goal for this market is the mixed asset VPP, as it brings together distributed generation and demand response to provide a synergistic sharing of grid resources. Rules need to be established to allow these transactions to flow back and forth through a common carrier grid, the Navigant report says.